Critique of the Terms of American Express's Clear Card
Here, I'm going to comment on the terms of the Clear Card from American Express, but be aware that the information on this page may be out of date, as all of my comments refer to the terms page as it was on 4/28/2007 at 6:29 PM EST.
So, for the official, up to date information on the card's terms, you'll want to visit the card's official terms page:
http://www201.americanexpress.com/apply/Fmacfservlet?csi=85/14947/b/4/0/0/0/n&from=57&afflSID=null
However, as of 4/28/2007 at 6:29 PM EST, their terms page states:
"The information in this application is accurate through 4/15/2007. This information may have changed after that date. To find out about any changes, please call us at 1-800-" [...]
So, for the absolute most up to date information, you'll have to call them, since even their website may mislead you. I omitted the number - see their terms page if you need it.
By the way, I am just a layperson, and trying to understand these terms from my layperson's perspective - not some kind of expert in reading gobbledegook fine print. It is very possible that I am not understanding this stuff correctly, so, bear that in mind.
Critique
The following comments are all based on the Clear Card's terms page as of 4/28/2007 at 6:29 PM EST.
This Clear Card's terms page seems to claim the card features no late fees, no overlimit fees, no cash advance fees, and no balance transfer fees. No dishonored check fee, no wire transfer fee, no stop payment order fee, no statement copy fee. And, while the terms page makes reference to finance charges, I can't see any finance charge amount stated anywhere.
The lack of the major fees, and the apparent lack of smaller finance charges, is quite heartening, in my opinion.
It states that the introductory APR of 0% lasts for the first 6 months or first 12 months depending on their evaluation of your application. Then, they impose a 14.24%, 16.24%, or 18.24% APR, again based on their evaluation of your application.
Which gives them an opportunity to discriminate against certain people (probably poor, struggling people who are having a hard time making enough money to pay all their bills on time, is my guess) by giving some poorer terms than others.
These APRs seem to be on the higher than average end of the spectrum of purchase APRs, if you look at this rates comparison page for "Credit Card Rates for US : All : Personal : No annual fees" at Bankrate.com.
However, if the Clear Card's APRs were genuinely unchangeably fixed at those rates (or at least impossible to raise - lowering would be fine), I would find them acceptable enough.
Then there's some information in the third column about how variable APRs are calculated, which looks to be different from the 14.24%, 16.24%, or 18.24% APRs it mentioned in the first column.
How confusing... they should clarify this. In fact, they should actually make the entire thing perfectly plain and understandable English, with definitions for any obscure terms.
Unfortunately, like all too many cards, the Clear Card appears to feature a tremendously exorbitant Default APR - 30.24%.
It lasts for 12 consecutive billing periods, beginning with the current billing period when the default APR was applied.
A penalty APR being imposed for such a long period of time suggests to me that it's extremely likely that American Express will extract far more money from the people being penalized than American Express ever might have lost in the first place as a result of that person making two payments late in the past 12 months (and possibly only a tiny smidgen late, for that matter) - which, under these terms, appears to be all it takes to incur such a heavy penalty.
Also, I can't see anywhere where they make it clear how high the minimum payments will be.
So, that makes me nervous, because what's to stop them from jacking up the required minimum payment to something ridiculously high, and causing you to be "in default" when you can't pay it, and then giving you that crazy default APR of 30.24%?
And what's a financially struggling person going to do about that? Such a person can't afford to take it to court - oh, and like so many other credit card terms, these terms actually seem to possibly restrict you from going to court, or even participating in a class action lawsuit, but instead make you have to resolve things via "arbitration", whatever the hell that is.
Not that the court system is perfect, but, I always find it alarming when credit card companies wish to deny you that recourse.
This is perhaps another reason why a credit card boycott is quite possibly one of the best methods to force the credit card companies to clean up their act - even if you can't take the credit card companies to court, you can avoid being their customer, or at least you can avoid becoming the customer of the ones you aren't already entrapped by and enslaved to.
Balance transfer requests submitted with your application appear to possibly have a 4.99% APR, supposedly "fixed for life", but, farther down, it becomes evident that this "fixed for life" statement is quite possibly just bullshit. Look at this rather alarming statement:
"The terms of your account, including APRs are subject to change. The APRs for this offer are not guaranteed; APRs may change to higher APRs, fixed APRs may change to variable APRs, or variable APRs may change to fixed APRs. We may change the terms (including APRs) at any time for any reason, in addition to APR increases for failure to comply with the terms of your account."
So, here we potentially have some more of the typical credit card company "bait and switch", which Congressman Bernie Sanders spoke of in his statement on 4/4/2005 regarding The Loan Shark Prevention Act.
It doesn't look like this just means they can change your APR at will. It looks like this entitles them to change absolutely anything about their terms to absolutely anything else they like, anytime they like. This is very bad.
At least, though, they don't appear to have anything related to universal default in their terms. There is also no annual fee, or anything like a "participation fee" or "enrollment fee", etc.
And, I would guess, probably, hopefully, that thanks to the lack of any late or over-the-limit fees, this card with the outlandish penalty APR of 30.24% nonetheless would work out to be less expensive than a typical credit card, with the same insane default APR plus late and over-the-limit fees, and pointless monthly finance charges.
I don't know for sure, though, as I haven't attempted to do the math.
My Overall Opinion
So - overall, assuming American Express doesn't turn around and suddenly change the terms to something worse, I'd say I think the Clear Card definitely appears to be a major improvement on many cards, and I hope it starts a trend, and I hope it's not some kind of dishonest bait-and-switch ploy.I would recommend being cautious and keeping as close an eye on them and their terms as you would (or should) with any other credit card.
Especially since American Express is still offering other cards with ridiculous terms - which means they don't yet deserve to be wholly exempt from the credit card boycott.
However, the Clear Card, as far as I know so far, may be the least objectionable credit card currently available anywhere, and balance-transferring your debts to them and away from creditors with giant late fees, over-the-limit fees, and crazy interest rates might be a decent idea - as long as American Express doesn't change the terms on you to something crazy later.
Fortunately, one of the main selling points of the Clear Card is "no fees of any kind", so, if American Express diverges too drastically from that claim, it will be an obvious bait-and-switch, and my guess is they would take a lot of flak for that, and lose tons of customers and potential customers, so hopefully they probably won't suddenly turn around and start imposing late fees, overlimit fees, etc.
So, the Clear Card might be a good way to set yourself free from, and boycott, the creditors with less reasonable terms.
If you do manage to empty out your other cards - from first-hand experience, I know the best way to keep from filling up your cards again is to simply cancel your card.
It may not be the safest thing to do if you're always living on the edge of financial ruin and homelessness, but, getting rid of your cards is the surest way I know of to avoid building up more credit card debt.
On the other hand, the more cards you have, then, perhaps, the more you can keep shuffling your debt around from card to card and perhaps avoid late fees and over-the-limit fees - as long as they don't get filled up completely.
The problem is, if some emergency arises, the temptation to put the expense on your credit card may be irresistible - that's why I think the surest method not to keep building up credit card debt is to get rid of your cards.
I would not be in the mess I'm in now if I had cancelled my cards a few years ago when I got them paid down to $0, instead of keeping them "just in case". My family would have had to manage some other way besides putting massive debt on my credit cards in my name, much of which I'm doubtless going to end up paying for myself out of my own money (once I hopefully get some).
I am enthused enough about the Clear Card's terms that, despite the scary "We may change the terms (including APRs) at any time for any reason" part, I rather wish I could have gotten a Clear Card myself.
I was perfectly prepared to balance-transfer my Capital One and Providian balances to the Clear Card, but unfortunately, my application was rejected, despite the fact that I haven't paid a single bill late anywhere since April 2006.
I haven't yet been given the reasons why my application was rejected, but I'm sure it's probably for the same reason everything else I've applied to ever since June 2006 has been rejected - my balances are too high, is the reason I usually get.
And, my guess is, my account unfairly being thrust into default/"collections" (the story of which is told in this section of the credit card boycott page) is probably another factor. I can't remember off-hand if any denial of credit to me has mentioned that as a reason, though, because I seldom even try to apply for any kind of loans, cards, etc. anymore (since I never am approved, and besides that, I hate debt).
A Suggestion to American Express
Aside from reading the rest of this page, particularly the critique section, and revising their policies accordingly, I suggest that American Express/Clear Card revises their automated application review process, because many of the people who are in the most dire need of relief from their bloodsucking creditors and the negative amortization resulting from fees won't be able to obtain this card.
It shouldn't matter if someone's balances are "too high" - what should matter is how much integrity a person has evinced when it comes to repaying debts. For instance, I may not have much money, but I am reliable the vast majority of the time, and I keep on paying and paying and paying even my scumbag creditors, whom I despise and regard as usurious thieves.
Over the years I have missed payment due dates on rare occasions, and in October, November and December 2002, I had a three-month stretch of hardship where I could pay none of my debts - but I never had any intention of simply abandoning my debts and screwing my creditors out of the money I really did owe - the principal and the interest on my balance.
(Not the insane late and over-the-limit fees, which I think should be illegal, and in fact, maybe they are: Credit Card Late Fees May Be Illegal).
So, American Express is missing out on a model customer - me. I would have taken my sweet time paying down my $10,000 in debt, especially since, due to the Clear Card's far more reasonable policies, I wouldn't be in such a major hurry to pay it off as I am to pay off my despicable current creditors (whom I wish to deprive of as much profit/loot stolen from me as possible).
If I had gotten a Clear Card and had positive experiences with it, I also would have provided a very public positive account of my first-hand experiences with it. But now, I can only comment on it from the outside looking in, and give only an uncertain, highly cautious endorsement, and no first-hand testimony as to the Clear Card/American Express's trustworthiness.
Cause for Hope
Despite the fact that I am disappointed by having been rejected for this card, nonetheless, I think this card may be a herald of substantial progress for the cause of fair treatment of credit card customers.
If American Express's success with this card is drastic enough - and if the other credit card companies lose enough customers to the Clear Card - perhaps the other credit card companies may even follow suit and adopt far more reasonable terms just in order to be able to compete.
As of 4/28/2007 at 6:29 PM EST, the terms aren't ideal, in my opinion, but they are an improvement on every other credit card terms I know of, and American Express deserves kudos for that.
Concluding Remarks
So, to conclude, I would tentatively suggest perhaps using the Clear Card as a tool to help you boycott the other credit card companies, which will encourage the other credit card companies to change their own policies to something more reasonable.
There is room for improvement in the Clear Card's policies, but their policies even as they stand now are fabulously better than all of the competition that I know of, and in my opinion American Express deserves to be rewarded for doing the right thing, even though there is more they could do.
Of course, I suggest that anyone who wishes to get this card should nonetheless be very careful, just as careful as you would (or should) be with any other credit card company, especially one which still offers other cards with egregious policies.
You can apply for the Clear Card here: applyclear.com
Your Comments
If you would like to read or post any comments regarding this page, and/or your own experiences with the Clear Card, you can do so at this blog post in my blog.